General Motors Lowers 2017 Sales Outlook

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General Motors has revised its outlook for U.S. new vehicle sales in 2017, with the automaker now forecasting sales to be in the “low 17 million” unit range across the industry.

The new estimate reflects a widespread expectation that auto sales will see a modest downturn, according to GM Chief Financial Officer Chuck Stevens.

“The market is definitely slowing … it’s something we are going to monitor month to month,” Stevens said during an analyst conference call. “Pricing is more challenging.”

The Culprit

U.S. new vehicle sales reached 17.55 million in 2016 following a growth spurt that started in 2010. One of the reasons for the lower sales forecast in 2017 is an overabundance of nearly-new used vehicles that will become available on the pre-owned market as a result of lease returns, thereby undermining new car sales.

Many automakers are already have already reported sales declines for first five months of 2017, including:

GM — down 1.05 percent to 1,171,291 units

Ford Motor Company — down 3.58 percent to 1,073,123 units

Fiat Chrysler Automotive — down 6.57 percent to 880,014 units

Toyota Motor Company — down 4.7 percent to 999,545 units

Honda Motor Company — down 0.2 percent to 652,093

GM ‘Somewhat Insulated’

Stevens said that the automaker’s sales could fall by 200,000 to 300,000 units in 2017, adding that GM had “somewhat insulated” itself from a decrease in sales volume by reducing sales to rental fleets, which keeps factories making vehicles that are sold at little to no profit, while lowering vehicle residual values.

U.S. Market Reliance

GM is highly reliant on the U.S. market for profit, so any negative movement in sales volume will likely have a corresponding impact on GM earnings and GM profitability.

Disciplined

During the call, Stevens reiterated that GM will “remain disciplined from a go-to market perspective”.

Discipline was a quality typically not a quality associated with the pre-bankruptcy “Old GM”, which was known for producing more vehicles than there was demand, and then selling them at a loss or at razor-thin margins by way of luscious cash-on-the-hood incentives and zero percent financing.

Stevens also stated that GM is looking to bring U.S. vehicle inventory down to 70 days’ supply by December 2017. The days’ supply was 110 days in June.